Banks Slam Plan to Give Extra Credit To CRA Stars

WASHINGTON - Bankers are opposing a plan to create what would amount to a new category of top performers under the Community Reinvestment Act.

The proposal would let examiners single out banks at the top of the "outstanding" and "satisfactory" categories by including a short comment in the bank's CRA report noting the extra performance.

The Greenlining Institute, a housing advocacy group, proposed the plan at a Dec. 1 meeting with Federal Deposit Insurance Corp. Chairman Ricki Helfer, who has agreed to circulate it among the other banking agencies.

"We will look at whether we can develop such an approach on an interagency basis to recognize the accomplishment of institutions at the high end of the top two rating categories," said Alan Whitney, a spokesman for Ms. Helfer.

Bankers and trade group officials said the proposed comments would be confusing and meaningless.

"It takes consistency to really deliver that, and we don't have that consistency yet," said Catherine Bessant, a senior vice president at NationsBank Corp.

The proposal would just add to the CRA headache, warned John P. LaWare, a former Federal Reserve Board governor now with the Secura Group, a bank consulting firm.

"It seems to me the 'outstanding' and 'satisfactory' and 'needs to improve,' and 'substantial noncompliance' ratings are pretty clear-cut," Mr. LaWare said. "I'm not sure what this would add to it."

The proposal could expose banks to community group protests if they don't secure extra praise, said Joe Belew, president of the Consumer Bankers Association.

"It is generally good to reward people," he said. "But if they are saying that a 'satisfactory' really isn't a 'satisfactory,' then that is counterproductive."

The proposal also would be nearly impossible to implement, said Karen Thomas, director of regulatory affairs at the Independent Bankers Association of America. "It is likely to create more problems than its solves," she said.

But Robert Gnaizda, general counsel at the San Francisco-based Greenlining Institute, said the change would allow regulators to reward banks that go beyond their legal obligation to invest in their communities.

To bolster his case, Mr. Gnaizda brought several bankers with him to the meeting.

John Nunn Jr., a senior vice president at American Savings Bank and a participant at the meeting, said the rating plan would give banks with outstanding ratings an incentive to do even better.

"Hopefully, by using this language they would be able to point out those institutions that are truly outstanding," Mr. Nunn said.

Paul Sachtleben, the FDIC's director of compliance and consumer affairs, said the revised CRA rules may satisfy the Greenlining Institute's demands.

"What we want our examiners to do is make a clear statement as to how the bank is doing," Mr. Sachtleben said. "The rating will be specifically identified, and then immediately following that will be a requirement to list factors supporting the bank's rating."

"We might not have any sound bites in there," he added.

But Mr. Gnaizda said he wants the "sound bites," adding that they are an easy way for top banks to garner positive publicity.

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